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Notes From The JPM ’17 Vortex: Trump, Rainstorms & The Price You Pay

Xconomy National — 

[Editor’s note: Ben Fidler contributed to this report] The week of frenetic data sharing, deal talking, and party hopping of the J.P. Morgan Healthcare Conference—and the events that have mushroomed around it—took a punch to the gut just as most attendees were wrapping up and checking their outbound flight status.

The incoming party-pooper-in-chief, Donald Trump, said during his first press conference Wednesday that drug companies are “getting away with murder” and he’d work to rein in prices and other practices. You could hear the needle screeeeeeeeching across the vinyl. (Good thing it came Wednesday; Tuesday is the biggest J.P. Morgan party night.)

His soundbite offended many people who rightly noted that they are working to heal people, not kill them. But his rhetorical brinkmanship fed upon deep and legitimate concerns that many here in San Francisco were already debating in the days leading up to the Trump presser: Prices are unsustainable, and the industry’s reputation is in tatters. In interviews with Xconomy and others, Allergan (NYSE: AGN) CEO Brent Saunders added context to the high-profile pledge he made last year to limit price increases across his company’s extensive product line.

He wasn’t the only one talking up responsibility. Across many conversations, however, it was clear to us that good-pricing practices—especially the oft-bandied word “transparency”—mean different things to different companies. No company, as far as we know, is willing to tell the world what their products actually cost after middlemen like Express Scripts (NYSE: ESRX), who negotiate on behalf of health plans, extract discounts for their clients.

Most of the pricing talk has centered around big companies with multiple products, such as Allergan, Novo Nordisk, and Johnson & Johnson. But it’s also important to check with smaller biotechs that are gearing up for potential commercial launches whose fortunes hinge upon those sales. Read on to find out how the attitude of one biotech has evolved since last year’s J.P. Morgan, plus much more about pricing, politics, and… umbrellas? Step into the vortex.

…Or Your Money Back? Alnylam Pharmaceuticals (NASDAQ: ALNY) is one of the few companies that says it’s willing to give money back or leave it on the table if its products don’t work. At least in theory—it doesn’t have a marketed product. But if the experimental patisiran succeeds in Phase 3 trials this year, Alnylam could soon become a marketer, not just a developer.

Last year at J.P. Morgan, CEO John Maraganore told Xconomy that the company would be creative about drug pricing, but he wouldn’t talk specifics. This year, company president Barry Greene went a step further, saying Alnylam is “highly willing” to sign performance-based deals “so that payers will appreciate that they’ll only pay where the drug works.” Greene said Alnylam has been crunching numbers to justify the price it presents at the start of negotiations with payers. Patisiran is meant to treat the rare disease TTR amyloidosis. If patisiran fails, it would likely take Alnylam years to get back to this spot. “The opening of [that] envelope is probably the biggest pivotal moment for us,” said Greene.

Simon Says: Vice President Joe Biden’s handpicked “cancer moonshot” chief Greg Simon gave perhaps the best riposte to Donald Trump’s pharma attack this week—and it came the day before The Donald held his press conference. Speaking on a lunchtime panel of Washington bigwigs Tuesday, Simon described Trump’s previous criticism of drug pricing and gouging this way: Pretend Martin Shkreli is walking down the street with his wife, who happens to be the biopharma industry. Trump hates Shkreli, so as he approaches the couple, he loads up and punches Shkreli’s wife.

Simon is a Democrat through-and-through—he was Vice President Al Gore’s domestic policy adviser. He is also pro-drug development; he helped launch FasterCures and ran it for six years, then did a stint at Pfizer, and for a short time he led the healthcare crowdfunding firm Poliwogg. On the panel, in fact, he stumped for financial creativity as the solution to the drug price debate: “The problem is there are no future markets [in the pharma business], it’s all on a cash flow basis.” In other words, it’s hard for drug companies and their investors to spread the risk, he asserted: “It’s a financial issue, not a moral issue.”

Simon made other pointed political comments, fretting about the anti-science bent of Trump—a concern that many in San Francisco shared in light of Trump’s anti-vaccine stances and potential promotion of Robert Kennedy, Jr. So it was an awkward moment when one of the conference hosts, at panel’s end, chided Simon for getting political after apparently promising he wouldn’t. “You lied,” she said, perhaps tongue in cheek.

It was a puzzling moment, too. Wasn’t this a panel about politics and policy? She had no harsh words for Julie Gerberding, former director of the Centers for Disease Control and Prevention and now a top Merck executive, who said at CDC she had to deal with the “anti-science policies of the [George W.] Bush administration” and a right-leaning Congress. “Their effect was blunted because of the absence of big majorities,” she said, but most difficult for her was legislation that prohibited federal dollars going toward research on reproduction and gun violence. “We can imagine a lot of bad policy opportunities,” she said, “but change occurs slowly. Agencies are very stable.”

Troubled Waters: One CEO of a high-profile publicly traded biotech company told Xconomy he was hanging out with med-tech executives and got an earful. It was about time pharma gave up its “pound of flesh,” they said. Medical device makers don’t get nearly the spotlight or funding that drug companies do; there’s long been resentment that pharma for years has gotten everything it wants from Washington.

Perhaps the universe was exacting some small measure of revenge this week with all the rain—some of San Francisco’s heaviest in decades—that pounded the conference. (Although device makers get rained on, too. Perhaps it was the weather equivalent of punching Shkreli’s wife.)

The wet, windy weather left dozens of umbrellas strewn on sidewalks and in gutters like roadkill. Desperate attendees searching for replacements ducked into chain drugstores like CVS and Walgreens, which were more than happy to oblige with $15 and $25 umbrellas. The hasty mark-up was obvious from the garish orange price stickers. Wait a second… CVS and Walgreens also own drug-purchasing middlemen that work on behalf of insurers and employers—and are a source of some of the markups that get blamed on the drug companies, say the drug companies. Sounds like something the president-elect should tweet about. Wet! Sad!

What Price Gene Therapy: No discussion about what drugs are actually worth is complete without a mention of gene therapy. Spark Therapeutics (NASDAQ: ONCE) could be the first to test the American market, as it expects to complete an FDA application for its treatment for certain kinds of inherited blindness, voretigene neparvovec, in the next few months, CEO Jeff Marrazzo told Xconomy this week. If accepted, it would be the first FDA review of a gene therapy. If approved, the pricing question would follow.

Unlike other drug types, gene therapy is a single procedure meant to produce a long lasting, if not permanent treatment. Drug companies would love to be paid based in large part on the long-term savings that a cure would save. But what if a treatment stops working after a few years? After its Strimvelis was approved in Europe last year for a rare immune system disease, GlaxoSmithKline said it would charge $665,000 upfront but would give money back if it didn’t work. (Before Strimvelis, the $1 million gene therapy Glybera from UniQure was approved in Europe but barely got off the ground.)

Spark CEO Marrazzo wouldn’t talk about specific pricing models, but he did note that 93 percent of the patients in the voretigene neparvovec Phase 3 trial have gained back some visual function, and that the treatment has been proving more and more durable, which Spark will take into account when building a case about the drug’s value. “You multiply that out, and then you have a value point,” Marrazzo said, but added it’s unclear whether that value will be paid up front or over time. “We’re going to at least put a stake in the sand on alternative ideas as we go through this year.”

There’s plenty of talk about gene therapy pricing, including a meeting Marrazzo says the nonprofit group ICER convened last month with payers and gene therapy manufacturers to talk about how to price and pay for gene therapies in the U.S. “The good news is the conversations are happening and people are talking about the different ways of trying to do this,” he says. “The question is how much will get accomplished before [Spark] has something that can help people.”

Coulda, Woulda, Sarepta: One of the biggest biotech stories of 2016 was Sarepta Therapeutics (NASDAQ: SRPT), which saw its eteplirsen (Exondys 51) become the first-ever approved therapy for Duchenne muscular dystrophy. It was highly controversial, with the FDA drug chief Janet Woodcock overruling negative recommendations from her staff. The FDA gave eteplirsen an “accelerated” approval; to stay on the market, Sarepta must prove by 2021 that the drug is actually working.

Sarepta CEO Ed Kaye told investors at J.P. Morgan that the launch is off to a rocky start, but it was good enough to send shares up more than $9, or 31 percent, before Trump’s Wednesday comments shaved a bit of cream off the top.

Mention of the approval was enough to make BioMarin Pharmaceutical (NASDAQ: BMRN) CEO Jean-Jacques “JJ” Bienaimé bristle. The San Rafael, CA, company had bet on a rival Duchenne drug, drisapersen, by buying Prosensa for $680 million in November 2014. But the FDA rejected the drug last January, and BioMarin shelved it five months later. Bienaimé wasn’t surprised to see insurers pushing back against Sarepta’s scanty clinical evidence. “Payers are not fools,” he told Xconomy.

Some FDA staffers questioned whether the eteplirsen approval, pushed by a powerful patient community, opened the door for other patient groups to pressure FDA. The agency has moved recently to include patient perspectives into their decisions—and the new 21st Century Cures Act directs it to do so even more.

But Bienaimé and his chief medical officer Hank Fuchs said the eteplirsen approval was an outlier, and we’re not likely to see the same amount of pressure work again for such a poorly characterized drug. Like any good clinical expert, Fuchs expressed the moment in statistical terms: “The ratio of patient-activism voices divided by number of patients successfully treated in clinical trials might be an all-time exceptional ratio.”

Old postcard of the St. Francis Hotel in San Francisco from K P via a Creative Commons 2.0 license.